Texas Jury Finds that Eolas Technologies Does Not Own the World Wide Web

On February 8, 2012, an eight-member federal jury, comprised of laypersons from the Eastern District of Texas, invalidated two internet patents. In the suit filed by co-plaintiffs Eolas Technologies (“Eolas”) and the University of California (“UC”), the plaintiffs alleged that co-defendants, including some of the world’s largest internet-based companies, infringed the two patents in question. This decision has many parties that operate over internet-based technologies and public-domain advocates breathing a sigh of relief. The invalidation of the two patents mitigates potential future liability of infringement for parties that operate interactive websites.

Eolas, which biologist and company founder Michael Doyle named after the Gaelic term for knowledge, is a patent holding and licensing company that has successfully obtained royalty payments from large parties operating over the internet, including Microsoft in a famous 2007 case (for an undisclosed settlement amount reported to be in excess of $100 M USD). In recent years, Eolas relocated its headquarters from Chicago to the small town of Tyler, Texas, which houses the federal courthouse where many patent infringement cases are tried. Many plaintiffs choose the Eastern District of Texas for patent infringement cases because patent holders believe that the jury pool found in and around Tyler is extremely patentee friendly. Because of these actions, many commentators and parties participating in internet-based business transactions have characterized Eolas as a “Patent Troll.”

In 2009, Eolas filed a patent infringement suit naming more than 20 large internet and e-commerce companies as defendants, seeking damages in excess of $600M USD. According to Eolas, as broadly construed, the two patents grant exclusive rights over interactive websites. Essentially, Eolas contends that any party owning or operating an interactive website, which is any website containing hypermedia elements such as pictures or streaming audio/video, owes royalty payments to it. Many commentators argue that this assertion has potentially crippling consequences in the e-commerce sector.

Rather than allocating the significant resources required to litigate infringement suits, many of the co-defendants made a business decision to settle with Eolas. Parties that settled include Apple, Blockbuster, Citigroup, eBay, JP Morgan Chase, Sun Microsystems, and Texas Instruments. Alternatively, eight parties opted to defend their alleged infringing activities in court. These eight co-defendants include some of the largest internet companies in the world, including Google, Amazon, Yahoo, and YouTube.

The two patents that were ultimately invalidated are U.S. Patent Numbers 5,838,906 (’906 patent) and 7,599,985 (’985 patent). Both patents list Mr. Doyle as a co-inventor (along with two other inventors) and UC as the assignee. The ‘985 patent is a continuation from the ‘906 patent and was issued on the very day in 2009 on which Eolas filed its infringement suit against the 20+ co-defendants. The ‘906 patent was filed in 1994 and issued in 1998. The patents were a result of Mr. Doyle’s work as a biologist at UC San Francisco. At the time, Mr. Doyle and his team of co-inventors were working on methods and systems that allowed doctors to interact with images of embryos over the then emerging World Wide Web.

During the trial, the defendants asserted the defense that the two patents were invalid because the claimed subject matter did not meet the U.S. patent requirement of novelty codified in 35 U.S.C. § 102. The defendants asserted that the claims in the patents were not novel and that other parties had demonstrated and disclosed the underlying invention before the patent applications were on file at the United States Patent and Trademark Office (“USPTO”). To meet its burden of proof, the defense put several early web pioneers including Tim Berners-Lee, Pei-Yuan Wei, Scott Silvey, Dave Raggett (creator of the tag), and Netscape cofounder Eric Bina, on the witness stand. These witnesses testified that as early as 1991, they had conceived of, implemented, and publicly demonstrated early versions of web browsers, such as the collaborative Viola and Mosaic browsers. The defense also demonstrated that these early web browsers, which pre-dated the work of Mr. Doyle’s team, enabled users to interact with hypermedia over the web. The defense was also able to demonstrate Doyle’s team heavily relied upon previous contributions from other web pioneers, by introducing source code into evidence. The source code evidence demonstrated that Doyle’s team contributed only 334 new lines of code and that the other 18,000 lines of code were obtained from other from other sources, such as the early browsers that the defense’s witness had already designed and written.

The jury found that both patents were invalid because the inventions claimed in the patents were not novel. This finding effectively invalidated all property rights associated with the patents. Given the large amount of money involved, it is likely that Eolas will appeal the decision to the Federal Circuit, so stay tuned.